Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

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Tuesday, December 16, 2014

New Case: Fabian v. Lindsay


In Fabian v. Lindsey, the Supreme Court of South Carolina held that a third-party beneficiary has a cause of action for the lawyer’s error in defeating client’s intent.  

After the death of the decedent’s surviving spouse, one-half of the trust property was given to the children of his surviving spouse and the other half to his brother if he survived the decedent, which he did; if he did not, one-quarter to brother’s child and one-quarter to Erika, the child of another brother who predeceased the decedent. The brother died a few weeks after decedent and by the terms of the trust half of the trust remainder passed through his estate to his child. Erika would receive nothing even though two of the three trustees, including the widow and the decedent’s financial advisor, agreed that the trust failed to carry out the decedent’s intent to treat his brother’s child and Erika equally. Erika brought a proceeding to reform the trust, which ended with her accepting a settlement in which she specifically did not release any malpractice claims against the firm that drafted the trust.  She then brought an action for malpractice and breach of contract against the law firm that drafted the trust instrument.  The trial court granted the defendants’ motion to dismiss for failure to state a claim, but on appeal the Supreme Court of South Carolina reversed, recognizing for the first time a cause of action in both tort and contract by a third-party beneficiary of an estate planning document against a lawyer whose drafting error “defeats or diminishes the client’s intent.” Two justices concurred in the recognition of the tort action but not of the contract action; and they and another justice stated that the burden of proof, not discussed by the majority opinion, should be clear and convincing evidence. Fabian v. Lindsey, No. 27460, 2014 WL 5462562 (S.C. Oct. 29, 2014).

Special thanks to William LaPiana (Professor of Law, New York Law School) for bringing this case to my attention.

December 16, 2014 in Estate Administration, Estate Planning - Generally, New Cases, Professional Responsibility, Trusts | Permalink | Comments (0) | TrackBack (0)

Representing a Client With Diminished Capacity

ScaleA recent  Ethics Opinion from the Colorado BAR Association analysis the ethical issues and delicate balance between protecting a client and maintaining a normal lawyer-client relationship when an attorney is representing an adult client with diminished capacity when the representation is not in protective proceedings, such as guardianship and conservatorship. Provided below is the syllabus from the opinion:

There are times when a lawyer may need to consider whether the adult client's capacity to make adequately considered decisions relating to the representation is diminished. Should the lawyer reasonably conclude that the client's capacity is diminished in such a manner as to impair the client's ability to make adequately considered decisions regarding the representation or to give informed consent to a course of conduct by the lawyer when required, the lawyer must maintain a normal lawyer-client relationship with the client insofar as reasonably possible. If the lawyer reasonably believes that the client's diminished capacity places the client at risk of substantial physical, financial or other harm unless action is taken, and that the client cannot adequately act in the client's own interests, the lawyer should consider whether to take reasonable protective action necessary to protect the client's interests. In taking such protective action the lawyer should be guided by the wishes and values of the client and the client's best interests, and any protective actions taken should intrude into the client's decision making authority to the least extent feasible. In taking protective action the lawyer is impliedly authorized to disclose information relating to the representation which Colo.RPC Rule 1.6 would otherwise prohibit, but only to the extent reasonably necessary to protect the client's interests. Care should be taken to insure that information disclosed cannot be used against the interests of the client. Differences may arise between the lawyer and client regarding whether or to what extent the client’s capacity is diminished; whether the lawyer should reveal information regarding the client’s condition, or whether the lawyer should take any actions to protect the client. These differences may present conflicts between the interests of the client and those of the lawyer and the lawyer must assess whether representation of the client will be materially limited as a result.

Special thanks to Michael Kirtland (Attorney, Colorado Springs, CO) for bringing this opinion to my attention.

December 16, 2014 in Disability Planning - Health Care, Elder Law, Professional Responsibility | Permalink | Comments (0) | TrackBack (0)

Saturday, December 13, 2014

Trust Administration Planning

Trust administration

A trust is a common structure utilized to realize widely recognized and accepted freedom of disposition.  The law of trusts permits the grantor to set forth a private law that both permits and restricts the use of property for the benefit of two or more people, either simultaneously or in succession. 

While trusts are an effective vehicle for wealth management, there is room for disagreements about “who gets how much and when.”  Whatever benefits a trust may provide, conflicts can offset those gains and inflict a burden on the management of the wealth subject to the trust.  Thus, in order to minimize burdens that may result in litigation, every trust should have an administration plan.

A trustee has four rudimentary tasks: to secure and protect the trust assets; invest the trust assets; make distributions to the beneficiaries; and keep records, file tax returns and meet compliance obligations.  The trustee is subject to the highest levels of fiduciary duties, and often come into focus when a dispute arises between the trustee and one or more beneficiaries.  Accomplishing the trustee’s basic tasks may be more complex. 

When an individual trustee takes on a new trust, it is helpful to exercise to follow the common corporate trustee practice of creating a “head sheet.”  The head sheet contains a summary of the key provisions and elements of the trust, including grantor, current and successor trustees, current and successor beneficiaries, remaindermen, purpose and goals tax status, etc.  As part of the trust administration plan, the head sheet should be reviewed and updated.  The significant elements of any trust administration will change over time. 

See Joseph C. Mahon and Patricia Angus, Planning Trust Administration to Avoid Conflicts, Wealth Management, Nov. 21, 2014. 

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

December 13, 2014 in Estate Planning - Generally, Professional Responsibility, Trusts | Permalink | Comments (0) | TrackBack (0)

Monday, November 24, 2014

Beware of Trust Mill Peddlers


There is no shortage of non-attorneys willing to give advice about estate planning, and this advice is often give for the non-attorney’s own financial gain. 

In Michigan, the State Bar has received numerous complains regarding estate plan salespersons practicing law without an attorney license by giving advice.  The Michigan Attorney General has received complaints of deceptive sales practices by annuity and life insurance peddlers.  The Michigan Office of Financial and Insurance Services has acquired similar complaints.

The peddlers use two primary schemes to access you and your money.  The first is a free lunch or dinner presentation under the semblance of providing estate planning or other information.  The second is the home visit brought about by a lead card mailed to you offering free estate planning information that you fill out and mail back to them.  Some use a combination of the two. 

Peddlers try to sell you a trust plan without knowing your situation or your assets and income.  Frequently, they say you do not have to pick and choose what you want in your estate plan because they know what you need and will provide it.  This is very common with trust mills.  They have a single trust form, allowing them to prepare so many trusts in one year. 

So, how do you protect yourself from the trust mills?  Of course, be on guard and on the lookout.  Use reputable and knowledgeable estate planning, investment, insurance and tax professionals in order to plan for the future accordingly.

See Matt Wallace, Trust Mill Peddlers Are Alive and Well, The Times Herald, Nov. 22, 2014. 

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

November 24, 2014 in Estate Planning - Generally, Professional Responsibility, Trusts | Permalink | Comments (0) | TrackBack (0)

Thursday, November 20, 2014

Griffin Industries Fiduciary Duty Case Going to Trial in May

Gavel2As I have previously discussed, a family feud over inheritance between the Griffin Industry heirs has four sisters pitted against three brothers. The sisters brought suit accusing their brothers of misappropriating their inheritance by transferring property the sisters were owed to the family company controlled by the brothers. Last week, a Federal district judge denied the brother's request that the September summary judgment ruling that found they breached their fiduciary duty to their sisters be reconsidered. A trial date has been set for May 5, 2015 and is scheduled to last four weeks. The brothers will present their affirmative defenses at the May trial.

See Andy Brownfield, Trial Set For Griffin Industries Family Legal Battle, Cincinnati Business Courier, Nov. 17, 2014.

November 20, 2014 in Estate Administration, New Cases, Professional Responsibility | Permalink | Comments (0) | TrackBack (0)

Wednesday, November 19, 2014

South Dakota Trustee Indicted for Fraud

TheftA 57-year-old South Dakota man has been indicted for multiple counts of wire fraud and money laundering, partially in connection with a scheme in which he stole funds from a disabled beneficiary of a trust that he was trustee of. Randall William McKee is accused of transferring funds from the trust to his business and then transferring the funds from the business to his personal bank accounts. McKee's trial is scheduled for January of next year.

See U.S. Attorney's Office, Sioux Falls Man Charged With Fraud and Money Laundering, FBI, Nov. 10, 2014.

November 19, 2014 in Estate Planning - Generally, Professional Responsibility, Trusts | Permalink | Comments (0) | TrackBack (0)

Monday, November 17, 2014

JP Morgan Resolves Trustee Dispute


JP Morgan Case & Co. settled a lawsuit by Texas mineral rights owners who accused the company of cutting deals with oil company clients to cheat them out of $691 million in compensation.  The dispute centered around payments for rights to drill in Eagle Ford, a shale formation underlying central and southwest Texas that has helped put the U.S. in competition with Saudi Arabia and Russia for title of the world’s largest oil producer. 

Beneficiaries of the South Texas Syndicate Trust accused the bank (who were supposedly working on their behalf) of instead concocting advantageous deals with commercial-banking clients Petrohawk Energy Corp. and Hunt Oil Co. for cut-rate prices on the trust’s rights in Eagle Ford. 

“The case was resolved with some conditions, and the jury was excused,” a lawyer for the trust beneficiaries said.  “[A] sufficient number of beneficiaries will sign the accord at their annual meeting in San Antonio this weekend.”  Although an agreement was reached without disclosing the terms, the beneficiaries would receive $40 million from the bank. 

JP Morgan denied claims of “self-dealing,” claiming the plaintiffs’ allegations were based on the benefit of hindsight.  “A trustee’s dueties and responsibilities are not to be judged by hindsight.  There’s not Monday-morning quarterbacking.”

See Margaret Cronin Fisk and Laurel Brubaker Calkins, JPMorgan Settles Claims It Cheated Shale-Rights Owners, Bloomberg Businessweek, Nov. 16, 2014. 

November 17, 2014 in Estate Planning - Generally, Professional Responsibility, Trusts | Permalink | Comments (0) | TrackBack (0)

Friday, November 14, 2014

New Jersey Attorney Facing Prison After Stealing From Elderly Clients

JailNew Jersey attorney Barbara Lieberman was charged in March for taking control of financial accounts and stealing funds from her elderly clients. Lieberman was accused of forging documents to make herself power of attorney over clients and adding her name to their bank accounts. Lieberman plead guilty to money laundering, and will face prison time at her February sentencing hearing, which according to the terms of her plea deal will be recommended by prosecutors to be a 10 year sentence.

See David Gialanella, NJ Lawyer Pleads Guilty to Robbing Elderly Clients, New Jersey Law Journal, Nov. 3, 2014.

November 14, 2014 in Current Events, Estate Planning - Generally, Professional Responsibility | Permalink | Comments (0) | TrackBack (0)

Monday, November 10, 2014

Nearly Two Decade Long Griffin Family Feud Expected to Begin Trial in January

Gavel2As I have previously discussed, the $840 million sale of Griffin Industries in 2010 reignited a family feud between four Griffin sisters and three Griffin brothers over inheritance and control of the company. Griffin Industries, created by the siblings' deceased father John Griffin, is a Kentucky animal-rendering company.

The feud that has continued for nearly 20 years may be coming to a close. A January trial date is expected to be scheduled this week. In a previous ruling, it was held that two of the brothers breached their fiduciary duties in their administration of their parents' estates through stock transactions in the 1980s, which gave them control of the company at their siblings' expense.

See  Dan Monk, Family Feud: Griffin Industries Inheritance Fight Still Going Strong After 19 Years; Could End Soon, WCPO, Nov. 8, 2014.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

November 10, 2014 in Estate Administration, New Cases, Professional Responsibility | Permalink | Comments (0) | TrackBack (0)

Sunday, November 9, 2014

Attorney Charged With Stealing From Family Members' Estates

TheftA New Jersey attorney is facing five to ten years in state prison after being charged for theft. The attorney, John F. Hamill, is accused of stealing from two estates, his aunt's and his cousin's, that he was the executor of. Hamill allegedly stole nearly $500,000 from the two estates, by depositing funds into his own account from his aunt's estate and making cash withdrawals from his cousin's estate. The funds are believed to have been used to pay off debts owed by Hamill and for personal use.

See Caitlin Brown, Hudson County Attorney Arrested and Charged with Stealing Almost $500,000 From Estates of Cousin, Aunt, Nov. 7, 2014.

Special thanks to Reid K. Weisbord (Vice Dean, Professor of Law, School of Law-Newark) for bringing this article to my attention. 

November 9, 2014 in Estate Administration, Professional Responsibility | Permalink | Comments (0) | TrackBack (0)